Canadian Securities Course (CSC) Level 2 Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

A disadvantage of fee-based accounts is that they may have a limited number of trades. In fee-based structures, clients generally pay a flat fee or a percentage of assets under management, which can lead to advisors being less incentivized to execute frequent trades. This can create a perception of limited flexibility in managing investments compared to commission-based accounts, where traders are often rewarded for the volume of trades they execute. Therefore, the structure of fee-based accounts can sometimes result in less active trading strategies, which may not align with a client's desire for frequent trading opportunities.

In contrast, the other options highlight attributes that are typically seen as advantages rather than disadvantages. Lower costs for clients and greater transparency are generally perceived as benefits of fee-based accounts, as they provide clarity around fees and often result in a more straightforward cost structure. Furthermore, "no potential for neglect" implies a relationship between the advisor and the client that is more engaged and attentive, which is advantageous rather than a disadvantage.